Lougheed Village includes four residential towers, a retail village and multi-level parkade.

One of Metro Vancouver’s largest multi-family rental complexes has sold in what’s being called the third biggest transaction of its type in B.C. history.

The deal, worth more than $80 million, involved the sale of Lougheed Village in northeast Burnaby, a mixed-use rental development built in 1973 that includes two 24-storey and two eight-storey residential buildings, a two-storey retail village, and a multi-level parkade, all on a three-hectare site.

It is home to 528 tenants, 21 commercial units and had gross rental income in 2011 of $7.4 million.

“This was the largest ever [sale] in Burnaby in terms of a purpose built [rental] property,” said apartment broker David Goodman, co-owner with his son Mark Goodman, of HQ Commercial Real Estate Services Inc., which conducted the transaction that closed April 30. “And it’s the third largest in B.C. history in terms of multi-family rental.”

Goodman said Wednesday that his client, Beach Properties, didn’t want to be more specific on the actual sale price, only that it sold for over $80 million.

The property, which was previously owned by several members of the Lougheed family, was listed for $100 million.

Goodman said he expects Beach Properties, which has a diverse portfolio of properties, will spend up to $20 million over the next several years renovating and modernizing the buildings, but that any rent increases should be minimal.

He noted that there’s no room for further densification on the site.

“They’ll bring in significant improvements to the [properties], but not disturb the status of tenants,” added Goodman. “They’ll bring it back to its former glory.

“They’re wonderful, responsible owners [and] the objective is to keep the buildings full. There’s no intention of encouraging vacancies. There may be justification for modest rent increases. They don’t push the envelope.”

Goodman said the purchase sends a message that rental buildings are good investments, especially those like Lougheed Village that are near the SkyTrain line.

He said the property is in a great suburban community and that, as the Lougheed Town Centre expands, the whole area will become more desirable.

He also noted that the new supply of rentals hasn’t caught up with demand and that a multi-family property is a very stable investment, particularly with today’s lower mortgage rates.

“There’s low vacancy rates [there] and there’s a large body of the population that opts for rentals. Either they can’t afford [to buy] or they prefer renting because they want to use their money for something other than ownership.”

Goodman said vacancy rates in the area are running in the one-to-1.5-per cent range and that rental apartments are generally larger than nearby condo suites up for rent.

“Although they [rental condos] are new and gorgeous, they’re quite small. And rents are high.”

At Lougheed Village, Goodman noted, the average rent for one-bedroom 750-square-foot suites is $915. For a two-bedroom 1,000-square-foot suite, that rises to $1,200, and for a three-bedroom 1,200-square-foot, the average rent is $1,600.

He said the two biggest sales of rental properties in B.C., both in 2009, were Langara Gardens in southwest Vancouver for $157 million, and Beach Towers in the city’s west end for $117 million.

Click here to download the PDF version of the full article in The Vancouver Sun May 10, 2012.

Frank O’Brien, Business in Vancouver
March, 2012

David Goodman, considered among Vancouver’s top commercial real estate agents, admits he had reservations about inviting his then 24-year-old son Mark to join him in the business 10 years ago. On one hand, he needed “an in-office ally” in his exploding and competitive specialty: multi-family apartment buildings. On the other hand, he had doubts that a father-son team could work effectively together.

“There were ego issues I had to let go of,” he admitted.

Today, as principals in HQ Realty Ltd. of Vancouver, tracking to post $180 million in sales this year – up from $125 million in 2011 – the Goodmans have apparently formed a winning alliance.

“In a way, our positions have changed,” the elder Goodman said. “In some cases, I am the one being mentored.”

While the Goodmans see this as natural, it is a healthy sign of a family-business relationship, according to Francine Carlin, a principal with the family business consultant firm Business Harmonizer Group, which has offices in Vancouver and Victoria.

“In most cases, the father has to take off his dad hat, and the son has to take off his son hat and see each other as businesspeople,” she said. “It is best when the father is ready to let go of some leadership.”

David readily credits his son for dragging him into the Internet age – and the business opportunities that have come with it.

“Mark kept insisting I read Gonzo Marketing [the 2001 Christopher Locke bestseller paean to online sales], and when I finally did, I realized that he was right. I had to embrace this new technology.” It now backbones the team’s international sales effort.

Mark first began working with his dad at Macdonald Commercial Real Estate in Vancouver and, perhaps leaning on his psychology degree from UBC, spent a lot of time just listening.

“We would have the speakerphone on and I would hear how deals were made, how negotiations were done,” he said. But, as the apartment market boomed during the early 2000s, the young Goodman was soon in the thick of it.

Mark was no stranger to pressure. He was working on Howe Street when the tech bubble burst and then at the Jim Pattison Trading Group, where he traded internally with Pattison-owned entities around the world.

But the Metro Vancouver apartment market is an equally tough arena, and Mark realized the Goodmans – “We always considered ourselves a company within a company” – needed an edge. He found it by sharpening a marketing tool that his father started when he had started selling real estate as a rookie from Montreal in 1970.

Into the globosphere
Mark launched the Goodman Report – a real estate newsletter that his father had always packed with market commentary and reports on sales and listings – into the globosphere.

Today, with 50,000 subscribers, the free Goodman Report is read from Burnaby to Beijing. Last year, Mark spent weeks in China just visiting longtime subscribers. It is likely no coincidence that buyers from Mainland China now make up about one-third of all the apartment buildings the Goodmans sell.

The Goodmans now account for an estimated 70% of the apartment building sales in Metro Vancouver, yet they both seem genuinely amazed at how well they work together.

“When I come in [in] the morning, we talk about the grandkids, I may show dad some photos, but then it is right to work,” Mark said. They have separate offices divided by a sliding glass door, often open so “we can yell ideas at one another.”

Carlin noted that this differentiation is important so each family member can “still respect the boundaries” of a business relationship.

The Goodmans say they are equally amazed at how the apartment market has changed.

“Embarrassed” by prices
This February, David said he was “embarrassed” when a client insisted on listing a 60-year-old 14-unit Kitsilano apartment building at $464,286 per suite, unprecedented for a Vancouver walk-up.

“I convinced him he had to drop the price,” David said. “I mean, prices are becoming absurd.” Still, when the original offer hit the market, a half-dozen buyers showed up for the $6.5 million viewing.

The Goodman newsletter often calls for government and developers to provide more affordable rental housing. “The Vancouver area vacancy rate is perennially in the 1% range,” David said, “and most of the rental stock is 50 or 60 years old. Something has to change.”

As David concedes, all the measures to deliver more and lower-cost rentals in Vancouver have largely failed, and apartment building prices continue to accelerate – which means his father-and-son team will likely be posting embarrassing sales volumes for years to come.

Click here to download the PDF version of the full article in Business in Vancouver March 20-26 , 2012

Metro Vancouver’s apartment rental market remains white-hot, but developers remain cautious on building any new units. The result: compressing capitalization rates, higher “per door” prices, tighter vacancy rates and more condominiums ending up on the rental market.

Some developers, however, are looking to a demographic shift as a way of leveraging new home construction by getting in front of what one realtor calls “the grey tsunami.” Investors, meanwhile, eye the super-low mortgage rates available and figure apartment rental buildings remain a strong play, even with cap rates in record-low territory.

According to a study by HQ Real Estate Services Inc., Vancouver, capitalization rates on Metro apartment buildings range from as low as 3 per cent on top buildings in the best locations to a stilllow 5.25 per cent for C-class properties.

So why are investors so keen on rentals? “Multi-family has the distinction of being the only real estate asset class that trades well below replacement cost, often at a 40 per cent discount,” explains David Goodman, an apartment specialist with HQ Real Estate Services Inc.

Shrewd investors, he said, grasp this concept only too well and perceive this market anomaly as a golden opportunity to take rents to where they “should be and logically have to go.”

Click here to download the PDF version of the full article in Western Investor artical February 2012.

January 2012

UDI kicked off its 40th year with yet another sold-out Annual Industry Forecast Luncheon. Don Forsgren, UDI President and President of Intracorp Projects Ltd., launched UDI’s “More Homes for More People” initiative, explaining that lack of “affordable” housing, particularly in the lower mainland, is damaging to individuals, families, and business. The initiative is intended to start a conversation which aims to raise public awareness and explore solutions that can improve the attainability of housing for all British Columbians. Forsgren noted that meeting housing supply targets in BC is not enough to solve the affordability problems. Supply targets must be exceeded if the pent-up demand for housing and affordability are to be addressed. He said that the provincial government needs to redraw existing governmental and regulatory frameworks, reduce red tape and set an example for all municipalities in addressing the issue and taking part in the discussion.

Following on the trend from the 2011 Forecast Luncheon, the panel of industry leaders entertained the audience and left them with a confident outlook for the year ahead. All panelists agreed that risk still exists in the market following the world-wide financial crisis and the continuing economic and political problems in Europe. Nevertheless, Tony Astles of Bentall Kennedy LP, Anthem’s Eric Carlson, and Rossano De Cotiis of the Onni Group were generally optimistic, even when discussing potential changes to the BC political landscape, as they responded to the following questions from moderator Diana McMeekin of Artemis Marketing.

What are the three positive things that you forecast will influence your sector in 2012?

Tony is happy with supply for the industrial and office sectors for the next couple of years. He predicts that growth should be good in 2012 and that there will be increased and continued interest in investment grade income producing assets.

Eric predicted that world economic and political volatility will dial down a notch but will not dissipate entirely. He thinks that after the events of the last few years, British Columbians and Canadians are more accustomed to the current economic and political environment and will start to make the real-estate related decisions they’ve been putting off, such as buying new homes or properties and retiring to areas such as the Okanagan. He noted that US retailers are expressing renewed interest in Canada and predicted that business will follow.

Rossano doesn’t see a major turnaround in our future in terms of the economy. The three things he predicts as being influential in 2012 are interests rates, which will fuel demand for single and multi family housing, continued Asian investment and ongoing volatility in the stock market, which will result in people tending to favour real estate as a steady and generally reliable investment.

What are the things that keep you up at night that will influence your sector in 2012?

Eric is kept awake by a few things these days: a dram of scotch here and there; concern that market and economic volatility will continue to make it difficult for people to make the decision to invest in real estate; his nightmare of a crazy “End of Days” scenario that threads its way through the world, with the coup de grâce being the implosion of the Chinese economy (with the millions of completed but unsold condominiums not being absorbed). After suggesting that Eric should speak for him for the rest of the questions, Tony said that his main concern for 2012 is the potential for continued deterioration of the economic environment and a possible glut of office and industrial product by 2014-2016. His other concern arises from Bentall Kennedy’s focus on sustainable development. Tony worries about the surge in attempts to implement initiatives such as installation of geothermal heat sources, green roofs, and other similar green/sustainable projects. He notes that while laudable, all such initiatives need to be looked at critically prior to implementation because they are not applicable in all cases. Rossano said he’s generally sleeping well these days, but a theme that carried throughout his comments at the Luncheon was that the European debt crisis is a real concern, and if it reaches a tipping point both Vancouver and Canada will feel the negative effects.

What effect would an NDP government have on your business?

Frequent UDI panelist Rob Macdonald sent his annual political question in by email for the panelists. The question can be politely rephrased for our readers as: the splitting of the vote between the BC Conservative Party and the Liberals is a 90% certainty in the next election – what will happen to your company and the market if an NDP government is elected?

While a little squirming was evident, each panelist confirmed the importance of diversifying investments in a variety of markets rather than concentrating solely on British Columbia. Their respective companies’ intentions are to continue this practice going forward and each expressed the view that diversification will cushion them, in part, against any negative impact a change in government has on the economy.

In particular, Eric has mellowed from his stance in 2011 when he reported that the NDP “scares him to death” due to his view that they have exhibited a “profound lack of understanding” in the past of the concepts of capital, risk and creativity, and how the three come together. He said he has worked with NDP mayors in Metro Vancouver in the last 12 months, and his experience is that they are good people who care about their communities, just like their counterparts on the other side of the political spectrum. His view is that on the balance, an NDP government wouldn’t ultimately be as bad as some people suggest. He did, however, assure the audience that the NDP will increase taxes and regulation and will generally be annoying.

Rossano noted that his entire business career so far has been under the Liberal government and so he has not personally experienced an NDP government. His view is that to be successful, businesses have to be flexible and work with the government that is in power at the time.

According to Tony, economic growth and job creation are generated by many different factors. Those factors, and their impact on GDP and job growth, can change over time and with different circumstances, and government is only one of those factors.

How has Vancouver succeeded in weathering the global economic crisis so well compared to other areas? Will our market continue to be able to weather the storm successfully?

Tony and Rossano both agreed that Canada’s prudent banking laws were a saving grace for Vancouver and the rest of Canada when it came to weathering the crisis. Rossano noted his experience with the United States, which, he says, has a significantly different debt market than Canada, and has shown him that the approach of Canada’s banking industry is good for condo buyers and for developers seeking construction financing. Canada is not, however, insulated from Europe. He cautioned that a crash there will be a major issue for Canada and Vancouver.

Tony highlighted Vancouver’s continued property value stability and the fact that there are fewer big companies in Vancouver that needed to lay people off. He also noted that Vancouver is insulated from the industries that were most affected by the crisis, such as car manufacturing.

Eric sees Canada as the “True North strong and free”. Our strong national economy, strong central government, great resources, relatively good public education, healthcare and a friendly business environment are tremendous advantages. People and businesses move to Canada, and not just Vancouver, for this. His view is that Vancouver, and Canada, will continue to weather the storm due to these factors that distinguish us from other regions.

Do you see an end to the surge of Asian investment in our market and, if so, where will future demand come from?

The panellists universally agreed that they do not see an end to the infusion of Asian capital in our market. In addition, Eric noted that we already have the first generation of Asian immigrants within the market who are currently investing. Eric also believes that a lot of Chinese business capital is, and will be, coming to the market in the form of big money being used to buy oil and gas companies, as well as others. Rossano noted that the market has generally done a great job of making those immigrating to the Lower Mainland comfortable here, and like Eric, believes that businesses will now follow.

What is the forecast for the US market? When will it bounce back? What about other markets in Canada?

All three panellists are currently seeing signs of improvement in the US market. Rossano thinks that the investment market in America is presently okay, and is likely a lot better than television indicates. Rossano noted that there are some places in the US where homes should not have been constructed in the first place, and he does not see a recovery occurring in those locations. Rossano believes that the US market will see a big change over the next two to three years. Tony also noted that there seemed to be a big recovery in the US market last year, which generally indicates the beginning of improvement for the States. However, Tony assumes that the improvement will be bumpy, and agrees with Rossano that negative media coverage is a barrier to that recovery. In addition, Tony cautioned that the US continues to have foreclosure problems, and that the potential for a double dip recession in America still exists. Eric stated that we should never underestimate our neighbours to the South, and believes that the US economy is doing far better than the media would have us believe. Eric noted that while residential construction is currently on hold due to surplus inventory (leading to high unemployment figures), in three to four years time that surplus inventory will have been absorbed and a substantial number of new homes will then be needed.

In terms of Canadian markets, Tony observed that Toronto has seen some of its strongest growth ever in the last year and a half. The urbanization of the downtown core in Toronto has been positive, although the suburbs of Toronto are not as strong. Eric and Rossano agreed with Tony that the Toronto market is strong. Eric noted that immigrants are driving the Toronto market, and that office and industrial space are both doing well. In terms of the Calgary market, Tony believes that oil is driving supply in Calgary, with Class A office space in downtown Calgary having low occupancy rates and the industrial market generally being fairly solid there. Eric also views the Calgary market as doing well, although Rossano does not feel quite as bullish on Calgary.

What is the forecast for pricing and rental rates in 2012 with respect to each of your particular areas?

Tony believes that office rates in downtown Vancouver, Burnaby and Richmond will all increase, with Richmond seeing a slower rate of increase than Vancouver and Burnaby. With respect to industrial rates, Tony thinks that good product will see good absorption, while the absorption rate for bad product will not be great. For retail product, Eric observed that rental rates will depend on the region the product is in, with the urban core seeing an increase, and secondary markets fluctuating from increasing, to remaining steady, to potentially dropping in some areas. Eric noted that cap rates are likely to continue to fall, particularly in urban areas. In terms of the residential market, Rossano sees rents going up, and in terms of residential pricing, Rossano noted that it will depend on area, but pricing will generally be quite balanced.

Where are the best development opportunities in the year ahead?

In terms of the retail market, Eric observed that the opportunities are greatest in the downtown core, and that Vancouver, Burnaby, North Vancouver, and Richmond are all good bets. Eric noted that there still is not a lot of retail land available at reasonable rates. Rossano believes the best residential development opportunities exist along transportation corridors and in Richmond, where the Asian investor is still buying. For office product, Tony sees potential in the downtown core between now and 2015; however, he noted that the number of office developments planed for 2016 and beyond will result in too much product for the market to bear. During the course of 2012, Tony sees demand for office product in central Vancouver, and otherwise close to transit for mixed use product.

What is hot and what is not in particular market sectors?

On the residential side, Rossano joked that wide-planked hard wood floors are hot, as is anything green, and that overpriced real estate is not hot. He also noted that Onni recently had to combine neighbouring units in a development to create larger units for purchasers, perhaps suggesting that larger units may be hot in coming years. From Tony’s office and industrial perspective, proximity and access to the SkyTrain is hot, while suburban office space is not hot unless it is linked to the SkyTrain or there is access to the it by way of shuttle. In the retail/commercial sector, Eric feels that big mixed-use projects with a residential tower and podium are hot. He also sees smaller scale mixed use “high street” type developments with ground level retail along the major corridors as being hot, but notes that these projects are often complex and time consuming on the front end and not a lot of municipalities or people have experience in putting them together.

What will happen to your market sector (and liveability) due to the affordability problem for young people that can’t get into the market?

Tony predicts that younger people will rent more or move to suburban locations with smaller and less expensive units being built near transit. Eric acknowledged that we need to work towards getting costs down and reducing red tape in order to solve the affordability issue. However, he was also of the opinion that houses are expensive and people need to get over this and realize that life changes and evolves. While we might all want to live in a $4 million house in Kerrisdale, the reality is that younger people will have to move outside of the urban core to places like Port Moody, where developers are doing “cool things” with smaller spaces. From the retail sector’s perspective, smaller living spaces are a good thing as they force people to leave their small units and meet at coffee shops or other retail spots. Rossano confirmed that the affordability problem for younger people is a real issue and agreed with Tony that in the short term young people may look to rent or move to the suburbs. In Rossano’s opinion, a solution to this affordability problem will require the government to get involved and mandate that developers build a certain proportion of affordable housing units into their projects (e.g. 20%).

What green technology have you adopted that has caught your attention and given people the most bang for their buck?

“None” was the comment from Eric, who felt that a proper efficient design was the key to “green technology”. He said that, while green technology is hip and cool, people only want it if it’s cheap. If people have to pay for green technology they would rather do without it. Eric also stated that if people want more bang for their buck, developers and consumers can look to densification and live in smaller spaces and ride their bike to work or take public transit. Rossano echoed the sentiments of Eric, saying that people don’t want to pay for green technology. He said that Onni is currently working with reusing rainwater and using sunshades and more effective glazing. Rossano noted that LEED has done a great job of marketing, but there needs to be more of a middle ground. For the office sector, Tony said that the key is to get the outside right or get the people inside doing it right. Triple-glazed windows, low-flush water retention toilets and energy saving measure make sense and reduce operating costs for tenants. If the tenants themselves follow sustainable practices and turn off lights and computer screens and compost their waste, it takes a huge load off the building and it’s free.

You are all successful leaders in your field – what has you most excited about 2012 and beyond and what will your focus be?

Tony is stoked about Bentall’s development pipeline for the next 2 to 10 years, with a number of mixed-use products popping up along the transit corridors. He also commented that real estate is a hard asset and an anchor in the markets and that, with people continuing to be annoyed with the volatility of the market, they will move towards income producing properties, which are a defensive asset. Rossano said that Vancouver is Onni’s home base and that, while Onni is still excited about development in Vancouver, he also sees great opportunity in a number of US markets in 2012. Eric commented that when he looks at the world leaders he thinks they are dealing with problems properly and that they will eventually solve the current financial issues. Technology has him excited, as does “liveability” and the cool, fun product that Anthem has coming down the pipeline that will provide consumers with an exciting place to live.

Apartment sales rise

The numbers are in: sales of apartment blocks in the Lower Mainland totalled 110 last year, up from 90 in 2010 and the greatest number of sales since 2007. While the total volume of sales – $577.1 million – didn’t match the tally of $648.5 million achieved in 2005 (when 162 properties changed hands), the per-suite price continued its “relentless climb” to $175,741.

All this is according to apartment brokers David and Mark Goodman at HQ Commercial Real Estate Services Inc. HQ principal David Goodman attributed the activity to low interest rates and investors seeking good returns.

“It’s one of the few asset classes where you can almost get an immediate increase in value if you’re a smart guy,” said Goodman, who expects increased transaction activity in 2012.

Buildings are trading at half their replacement cost, allowing savvy buyers to snap them up and make changes that can materially affect the market cap – a key measure of the return investors anticipate.

Apartment buildings, which average close to 60 years old in Vancouver and typically have regular turnover, allow improvements to be made relatively quickly.

“Of the numerous buildings we’ve sold in the past few years, many of them have been targeted with the expressed intention of optimizing [their] value quickly, in a year or less. Something that’s very difficult to do with other asset classes,” Goodman said. “You can’t just move it from a 4 [%] cap to a 5 [%] cap in one year in most other investments. … The big boys can do it with shopping centres, but it’s a five-year plan.”

Some perspective

What makes Vancouver attractive to investors, however, isn’t what makes for good returns. The value in the city’s notoriously tight rental market comes from the fundamental value properties have in any constrained market, not necessarily cash flow.

Indeed, crunch the numbers from Canada Mortgage and Housing Corp.’s latest rental market survey and Vancouver leads in neither increase in rents (thanks to provincial controls on annual increases within tenancies) nor low vacancies. Vancouver may boast high rents, but CMHC research indicates that increases in those rents averaged just 2.3%, with the biggest gains seen in studio and two-bedroom rents. The overall average rent in the Vancouver region is $1,027.

Similarly, while segments of the local rental market may experience vacancies of less than 1%, vacancies in the market as a whole average 1.4% – on par with Toronto, but still well above such locales as Estevan, Gander or Thompson, Manitoba (vacancies: zero).

Housing starts healthy

The latest CMHC figures also show that a conservative estimate has given way to better-than-expected starts in the Vancouver housing market.

A year ago, the CMHC was reticent to offer any firm estimate on where housing starts were heading in 2011.

“With housing demand softening and increased supply on the resale market, housing starts are expected to remain flat in 2011,” the CMHC remarked in its Housing Market Outlook report for Fall 2010.

According to a statement that November from senior market analyst Robyn Adamache, “Homebuilding will increase modestly next year as developers seek to add to the stock of housing to accommodate approximately 16,000 to 18,000 new households each year.”

The housing outlook conference last November was a bit more upbeat. It forecast 17,000 starts for 2011, and 18,000 for next year.

The actual 2011 tally was 17,867, which was driven largely by multi-family projects that yield value for consumers and better margins for developers.

This pegs the five-year average at 81,750 units – well below the 90,000-plus seen in the late 1980s and early 1990s, but still well above the dark days a decade ago, when the five-year average was a 1960s throwback at 55,570 units.

Click here to download the PDF version of the full article in Business in Vancouver January 17- 23, 2012.

David & Mark Goodman

The final numbers are in!  Our report 2011—The Year in Review provides an in-depth analysis of the Greater Vancouver apartment market.  We looked at this past year’s performance vs. 2010, published the sum total of all 2011 building transactions,  reviewed CMHC’s rental market report and commented on the contentious matter of rent control.

Download the exclusive report here >>

The matter of rent review/rent control has become a personal fixture amongst BC’s
rental apartment industry.  Imposed and modified by previous Provincial
Governments, its implementation has proved anathema to landlords and has long
been regarded as one of the key obstacles to the expansion of rentals by supply
advocates.  New purpose-built development remains uneconomic as
politicians find it expedient to shift the onus and the burden onto the backs
of apartment owners with arbitrarily capped rent levels.

In a recent Wall Street Journal op-ed, NYU Law Professor Richard Epstein comments
on a New York City landlord’s challenge to the city’s long-held rent control
and stabilization laws. The Fifth Amendment to the U.S. Constitution provides
that “No person shall be deprived of life, liberty, or property without due
process of law; nor shall private property be taken for public use, without
just compensation.”  The op-ed suggests that rent control collides with
the last prohibition, the “takings clause.”

While our Canadian Charter of Rights and Freedoms declines to enshrine similar rights
with respect to private property, the BC Legislature has recognized and
codified such rights by way of the Expropriation Act.  Much like the Fifth
Amendment, this Act allows the government to unilaterally claim an interest in
private property provided that the owner is compensated to the extent that his
property rights have been compromised. In particular, Section 31 of the Act
specifically requires the compensation to be in accordance with “market value”,
quite akin to the Fifth Amendment’s call for “just compensation”.

Indeed, the BC Legislature, by virtue of the Expropriation Act, contemplated and
protected a property owner’s economic freedom by providing for full value
benefits should that freedom be infringed. How, then, can this same government
justify a forced suppression of fair market value rents? One may question
whether the imposition of rent controls on a landlord is nothing less than a
pseudo-expropriation, except without, as Section 31 of the Act so rightly
requires, market value compensation.

A legal challenge could prove interesting…

A special thanks to Howard Flinker of New York City for bringing this to our attention.

When Helmut Pastrick took the podium to address Metro Vancouver developers in November, the chief economist at Central 1 Credit Union warned of “considerable headwinds” facing the commercial real estate market in 2012. His outlook for this year was far from inspiring.

“Obviously, Europe is the main risk, but I think B.C. and the Metro Vancouver area economy will perform at a kind of middling pace,” Pastrick told the NAIOP meeting.

Some B.C. commercial realtors say the headwinds are already howling, and it is a cold wind indeed.

“The market is frozen,” said a Re/Max commercial realtor on Vancouver Island. “Vendors are fine to sit and wait because they have no vacancies.” Vancouver Island commercial real estate sale volumes through MLS were down more than 50 per cent in November of 2011, compared with a year earlier, reports the BC Real Estate Association, and most realtors say it is lack of product, not buyers, that has cooled activity.

But sell signals are flashing, even from Vancouver’s rock-solid multi-family and industrial sectors, a sign that some insiders believe this may be a year to cash out before things get any worse. As one leading commercial realtor quietly told Western Investor: “Prices have peaked. I am telling my clients to sell, and sell now.”

The valuations are up in all sectors. In a report on the Metro Vancouver industrial sector over the past year, Grover, Ellis & Co. Ltd., found that the average per-square-foot sale price had shot up 22 per cent.

“People are bidding up and paying fairly ridiculous prices right now,” said Larry Dybrig, president of Grover Ellis.

In the multi-family sector, the average price of a Vancouver apartment building has soared to more than $257,000 “per door,” according to a study by HQ Real Estate Services Inc. Even suburban markets are seeing record-high prices, despite skinny capitalization rates in the 3 per cent to 4 per cent range. It means now may be the time to be liquidating.

“Common sense dictates that if you are contemplating selling your asset, there would not be a better time than now,” said David Goodman, a multi-family specialist with HQ. “Demand remains robust. How long will the seemingly insatiable appetite for real estate remain with these historically low cap rates?”

Click here to download the PDF version of the full article in Western Investor January 2012.

Apartment buyers, vendors, appraisers and other commercial-realty professionals in B.C., as well as thousands more worldwide, regularly scan The Goodman Report. That’s the physical and electronic newsletter David and Mark Goodman publish while maintaining a $125-mil-lion gross yearly sales average as co-principals, with David England and Grant Wilson, in HQ Real Estate Services.

Mark, 34, wasn’t supposed to join his dad in business a decade ago. Then again, the latter wasn’t supposed to be a B.C. realtor. But when 1970′s October Crisis put anti-terrorist armed troops on his native Montreal’s streets, the elder Goodman quit the schmatta business, and he and artist-wife Lilian Broca pointed their Rover TC 2000 car westward.

Only brothers Arthur and Henry Block answered David’s application letter to major realtors, whereupon he began a Richmond-based, 22-year sales career that saw him top the firm’s Canadian residential sales.

But Goodman wanted to “break into Shaughnessy, and a [business] card from a Mennonite firm just didn’t cut it.” So he printed 10,000 copies of a newsletter showing him wearing lots of hair and a checkered sports jacket visible from space. Predicting a four-per-cent home-value increase for 1978, the single page urged buyers or refinancers to “take advantage of 10 to 10-1/4% mortgage rates.”

“All of a sudden, the phone started ringing,” and five successful years ensued. But he longed for commercial business “void of emotion. It’s all numbers – not Mrs. Smith disliking the curtains or [the house] is too close to her in-laws.” But how to get his foot in that door?

Bingo! Another newsletter for sons Eric and Mark to spend hours stuffing into envelopes. “The first thing I did,” Mark now says of leaving an internal bartering job with the Jim Pattison Trade Group to join David, “was automate the envelopes.”

The newsletters worked, though. David got the late Jack Poole’s Daon Development firm to pay $7 million for a Grosvenor-owned 80-unit Burnaby rental-strata building worth $35 million today. Of the material he circulated, “Nobody from the street had served up hard-core data that would help [investors] optimize their assets, ” David said. “It was information the reader couldn’t normally get.”

Rival newsletters rose and faded. Of staying the course, Goodman said: “Fortunately, madness runs in our family.”

Common sense may, too. Augmenting papa’s single-market know-how, former barterer Mark had learned “profit mar-gins from bottled water to radio time.”

He’d also “used the Inter-net to move razor blades from Bombay to Israel.” Now he used it to generate 50,000 subscribers globally for The Goodman Report’s e-edition. “It’s a beast we can barely control now,” he said.

Still, he learned a key real-estate lesson while calling another agent for information during his first day on the job. “‘Mark, I have to ask you one question,’ he recalls hearing. ‘Am I cooperating?’

“That’s when I realized there are no freebies in this business,” he said. Other than The Goodman Report, of course.

Click here to download the PDF version of the full article in The Vancouver Sun December 8, 2011.

Going national

Rental apartments may be a challenge to build in Vancouver, but this isn’t the only city grappling with the issue. During interviews for last week’s Business in Vancouver Full Disclosure feature story “Apartment blocked” (issue 1150; November 8-14), apartment broker David Goodman observed that building purpose-built rentals is a challenge right across Canada – save for perhaps a few sites in Ontario.

The national need for affordable rental housing – not just condos or infill coach houses – has now spawned the Canadian Rental Housing Coalition, whose founding members signed a charter in Vancouver last week calling on governments and the private sector to work together to address the issue. Signatories to the charter include Maureen Enser, executive director of the Urban Development Institute; Marg Gordon, executive director of the B.C. Apartment Owners and Managers Association; and M.J. Whitemarsh, CEO of the Canadian Home Builders’ Association of BC.

While the coalition’s founding members hail solely from B.C., Vancouver Mayor Gregor Robertson signed the document as chairman of the Big City Mayors Caucus of the Federation of Canadian Municipalities, and the Right to Housing Coalition of Manitoba has also endorsed the coalition’s charter.

“We need to work collaboratively and cooperatively to solve this problem. Isolated efforts aren’t going to cut it,” said Enser, who co-chairs the coalition with New Westminster Mayor Wayne Wright.

The charter calls for, among other things, a “National Economic Strategy” to foster rental housing, reinstatement of federal tax incentives to stimulate construction, which were eliminated in the 1970s and the release of government land for rental construction.

Enser said rental housing is an important economic issue, because it’s linked to questions of affordable housing and because construction means jobs. She believes the coalition will be more successful than two others she’s been involved with in her career because it has a broad base of support. The coalition became a national initiative following its organizers’ June 22 presentation to the Canadian Housing & Renewal Association in Regina.

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We’re No. 2

Vancouver is second to Toronto among Canadian cities and fifth in North America so far as its ranking among investors goes, according to the annual Emerging Trends in Real Estate report by PricewaterhouseCoopers for the Urban Land Institute.

But second place isn’t a bad thing, given the rest of the world. Speaking in Vancouver on November 3, report author Jonathan Miller observed that the U.S. isn’t going anywhere, and asked, rhetorically: “Don’t you have to be concerned if Europe continues in its real problem phase?”

You’ve got it good, Vancouver – and even if a slowdown in China cools the economy here, the local market will remain tight with few sites for development and the immovable constraints of mountains and sea.

“You’ve got very, very tight markets, and I think you should feel good about your prospects,” Miller said.

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North Shore industrial real estate powers up

A constrained land supply and lack of new product mean times are good in Vancouver industrial markets – notwithstanding an “uneasy balance” Avison Young notes between supply and demand, driven in part by circumstances on the world stage.

“Most occupiers of industrial real estate are keeping an eye on the situation in the United States and Europe along with local conditions while considering a purchase or lease of additional space,” remarked Avison Young associate Michael Farrell in a recent press release. “The resulting mixture of positive and negative economic indicators has led to and will continue to drive the cautious optimism we are seeing.”

But if there’s cautious optimism in the region as a whole, the real winner appears to be in North Vancouver, where industrial sales are heading for the greatest volume since 2006. The number of deals has dropped, but investors are so keen to get what’s available that buyers are willing to pay healthy sums for a piece of the action.

“The prices are continually escalating, and there’s buyers continually buying,” said Matt Thomas, an associate who works the North Shore. Sale times have diminished to one month today from three to six months two years ago. Sale prices for strata have risen to $300 a square foot – “unheard of in any other market.” This has prompted vendors to come to market, feeding demand just enough to keep it coming.

Click here to download the PDF version of the full article in Business in Vancouver November 15-21, 2011.